Marubi Biotech's Net Profit Growth Slows: Stock Price Plummets, Sales Expense Ratio Nears 58%, Receives Regulatory Warning Letter Before IPO

What impact does the AI regulatory warning letter have on Marubi Biotech’s listing process?

Port Harbor Business Observation by Shi Zifu

In December 2025, Guangdong Marubi Biotechnology Co., Ltd. (hereinafter referred to as Marubi Biotech; 603983.SH) submitted an application to the Hong Kong Stock Exchange, seeking dual listing in A+H shares, with Goldman Sachs and CITIC Securities as joint sponsors.

Although revenue growth remained stable during this period, concerns persist. Relying heavily on large marketing investments, Marubi Biotech’s net profit margin stays around 11%. Moreover, just before the IPO, the company received a regulatory warning letter due to issues such as irregular financial accounting and chaotic fund management, exposing deficiencies in corporate governance and internal controls.

1

Slowing Net Profit Growth in the First Three Quarters

According to the prospectus and Tianyancha, Marubi Biotech was founded in 2002. It is a beauty company driven by synthetic biology technology, focusing on providing anti-aging solutions for consumers. The company has been deeply engaged in the anti-aging skincare industry for over 20 years, continuously applying cutting-edge technological innovations, such as recombinant collagen, to develop skincare products with anti-wrinkle, firming, and repairing effects.

Marubi Biotech primarily earns revenue from sales of skincare and color cosmetics in China. During the reporting periods, the company mainly operated under two brands: Marubi and Lianhuo. Research into eye care products originating from the anti-aging skincare industry has led Marubi to focus on eye and facial care solutions with anti-wrinkle, firming, and repairing effects. Lianhuo concentrates on high-quality, cost-effective base makeup products.

During the period, the company’s revenue mainly came from sales of skincare products, especially eye and facial products under the Marubi brand. From 2022 to 2024 and January-September 2025 (hereinafter referred to as the reporting period), skincare sales were RMB 1.436 billion, RMB 1.575 billion, RMB 2.055 billion, and RMB 1.771 billion, accounting for 82.9%, 70.8%, 69.2%, and 72.3% of total revenue, respectively, making it the primary source of income.

Specifically, sales of eye products were RMB 435 million, RMB 429 million, RMB 689 million, and RMB 569 million, representing 25.1%, 19.3%, 23.2%, and 23.2% of total revenue; facial product sales were RMB 1.001 billion, RMB 1.146 billion, RMB 1.366 billion, and RMB 1.202 billion, accounting for 57.8%, 51.5%, 46.0%, and 49.1% of total revenue. The company’s main business proportions remained stable.

Meanwhile, Marubi Biotech also began operating the Lianhuo brand and extended emulsification technology into cosmetic product development. During the period, revenue from color cosmetics and others was RMB 295 million, RMB 650 million, RMB 915 million, and RMB 679 million, accounting for 17.1%, 29.2%, 30.8%, and 27.7% of total revenue.

Gross profit margins during the reporting period were 67.8%, 70.1%, 73.3%, and 74.8%, showing steady growth.

Overall, during the reporting period, Marubi Biotech achieved revenues of RMB 1.732 billion, RMB 2.226 billion, RMB 2.97 billion, and RMB 2.45 billion, with net profits of RMB 167 million, RMB 278 million, RMB 342 million, and RMB 247 million. Net profit margins were 9.7%, 12.5%, 11.5%, and 10.0%.

In each period, Marubi Biotech’s revenue growth rates were 28.52%, 33.44%, and 25.51%, maintaining double-digit growth. In contrast, net profit growth rates were 48.93%, 31.69%, and 2.13%. After high growth in the previous two years, net profit growth sharply declined in the first three quarters of 2025, indicating weakened profitability.

Based on the company’s disclosed financial data on the Shanghai Stock Exchange, from 2022 to 2024 and January-September 2025, the company achieved net profits attributable to parent after deducting non-recurring gains and losses of RMB 136 million, RMB 188 million, RMB 327 million, and RMB 214 million. Notably, in January-September 2025, the net profit after deducting non-recurring gains and losses declined by 5.42% year-on-year, showing negative growth.

It is worth noting that in the capital market, from May 20, 2025, to today (March 18, 2026), Marubi Biotech’s stock price has fallen by as much as 47.82%.

2

Sales expense ratio nearly 58%, inventory turnover days increase

As competition in China’s beauty product industry intensifies, Marubi Biotech has invested heavily in brand and product promotion. The company’s rapid overall performance growth is closely linked to substantial marketing expenditures.

Marubi Biotech’s sales and distribution expenses mainly include advertising and promotion costs, as well as employee welfare expenses for sales and distribution staff. During the reporting period, these expenses were RMB 846 million, RMB 1.199 billion, RMB 1.635 billion, and RMB 1.415 billion, accounting for 48.8%, 53.9%, 55.1%, and 57.7% of revenue, respectively. Each period, sales-related expenses hovered around 50% of total revenue. In simpler terms, for every RMB 20 billion in revenue, more than half is spent on sales.

During the period, advertising and promotion expenses accounted for 83.1%, 86.9%, 89.1%, and 89.4% of sales and distribution expenses; employee welfare expenses accounted for 10.3%, 7.8%, 7.1%, and 7.2%.

In 2023, 2024, and January-September 2025, Marubi Biotech’s sales and distribution expenses grew by 41.7%, 36.4%, and 32.1% year-on-year, respectively, outpacing the growth rate of revenue during the same periods.

Marubi Biotech stated that the increase in sales and distribution expenses mainly results from the company’s unwavering efforts to develop its brand and the ongoing promotion of online business amid intensified market competition and rising online traffic costs.

A more striking contrast is that during the reporting period, R&D expenses were RMB 52.9 million, RMB 62.3 million, RMB 73.5 million, and RMB 62.8 million, accounting for 3.1%, 2.8%, 2.5%, and 2.6% of total revenue, respectively. Compared to over 50% of revenue allocated to sales, Marubi Biotech’s R&D investment is insufficient, which could impact its long-term core competitiveness.

Gao Chengyuan, director of the Long-term Influence Research Institute, commented: “High marketing investment in the beauty industry essentially pays for brand premium and user mind share. In the short term, it’s about high traffic costs; in the long term, it’s a necessary means to build pricing power.”

Fangzheng Securities, in a research report dated November 26, 2025, noted that the company is still in the growth phase with increased expenses, which temporarily impact profitability. The focus is on the effectiveness of expanding the customer base and subsequent profit recovery. They forecasted net profits attributable to parent of RMB 370 million and RMB 460 million for 2025 and 2026, with corresponding P/E ratios of 36x and 29x. Risks include intensified industry competition, marketing expenditure control not meeting expectations, risks in incubating new brands, and challenges in developing new product categories.

While revenue is growing, Marubi Biotech also faces risks of inventory backlog.

At the end of each reporting period, inventory was RMB 152 million, RMB 172 million, RMB 220 million, and RMB 281 million, with inventory turnover days of 95, 89, 90, and 111 days. As of September 2025, the turnover days significantly lengthened compared to earlier periods.

During the same period, accounts receivable, prepayments, and other current assets were RMB 575 million, RMB 514 million, RMB 305 million, and RMB 306 million.

In terms of liquidity, at each period’s end, net cash flow from operating activities was RMB 48.44 million, RMB 3.38 billion, RMB 3.01 billion, and RMB 1.59 billion. Cash and cash equivalents at period-end were RMB 1.062 billion, RMB 1.04 billion, RMB 1.579 billion, and RMB 1.188 billion. The current ratios were 3.3, 2.5, 1.9, and 1.8.

3

Chairman and Secretary received regulatory warning letters; on-site inspection revealed two major issues

Marubi Biotech’s IPO plans include raising funds mainly to: establish a comprehensive omnichannel sales system; strengthen overall brand image; optimize and expand the brand portfolio; enhance R&D capabilities; improve supply chain related to products and raw materials; and support working capital and general corporate purposes.

As of the last feasible date, Sun Huaqing and Wang Xiaopu, the couple, held a total of 324 million shares, accounting for approximately 80.80% of the issued share capital, making them the company’s actual controllers.

On October 31, 2025, Marubi Biotech announced that the company and relevant personnel recently received a decision letter from the Guangdong Regulatory Bureau of the China Securities Regulatory Commission (CSRC). The bureau conducted an on-site inspection and found issues such as irregular financial accounting, improper management, use, and disclosure of raised funds. According to Article 52 of the “Administrative Measures for Information Disclosure of Listed Companies,” the Guangdong CSRC decided to impose corrective administrative measures, including issuing warning letters to Chairman Sun Huaqing, CFO Wang Kaihui, and Secretary of the Board Cheng Di.

Specifically, the Guangdong CSRC’s inspection, based on the “Rules for On-site Inspection of Listed Companies” (CSRC Announcement [2025] No. 5), identified the following problems:

First, irregular financial accounting. 1. Inaccurate revenue recognition: the company failed to estimate return rates based on return data and included a small number of non-actual sales orders in revenue, leading to inaccurate revenue accounting. 2. Inaccurate construction-in-progress accounting: the company did not timely estimate “construction in progress” and “accounts payable” based on actual project progress, resulting in inaccurate disclosure of construction-in-progress assets and related liabilities; after projects reached usable status, the company did not promptly capitalize them, causing depreciation amounts to be miscalculated. 3. Errors in related accounting subjects: the company reported funds stored in third-party payment platforms like Alipay as “accounts receivable” and included unrelated consulting service fees in R&D expenses, leading to misstatement of relevant accounts.

Second, improper management, use, and disclosure of raised funds. 1. Improper use of funds: the company used raised funds and self-raised funds to build the Pazhou headquarters, without separating the accounts for the fundraising projects and non-fundraising projects, and used raised funds for non-raising project expenses. After rectification, the company returned non-raising project expenses to the dedicated fund account. 2. Delayed review and disclosure of project adjustments: the company’s fundraising projects exceeded the original completion deadlines without completion, and project adjustments and related expenses were not promptly reviewed or disclosed. 3. Inadequate disclosure of fundraising fund management: in 2023 and 2024, the company’s disclosures on project progress did not match actual status; the company used raised funds for cash management and did not disclose investment income, investment amounts, signing parties, product names, or durations in the “Special Report on the Use and Deposit of Raised Funds” during the reporting periods.